Article
Delivery the prime competitive weapon in retail grocery
Amazon's move to offer free delivery to current Amazon Fresh customers reveals how delivery is front-of-mind for retailers battling for consumer loyalty and business.
November 8, 2019 by Judy Mottl — Editor, RetailCustomerExperience.com & DigitalSignageToday.com
Delivery is officially the prime competitive retail weapon in the battle of retailers scrambling to attract and retain the consumer now that Amazon has eliminated its Amazon Fresh grocery delivery fee.
It's no small move, especially for the bottom line, as the omnichannel leader was charging $14.99 a month for the online service that requires minimum orders of $50 in New York City and $35 in Amazon's other Fresh market regions.
The move comes as retailers, including Amazon competitors, Walmart and Kroger, are working hard to not only keep current customers, but attract new one, even as Amazon expands its Whole Foods business — a $13.7 billion acquisition made in 2017.
Walmart charges an annual $98 fee for grocery delivery and is expanding grocery pickup options, including an in-home service and drop-off services. Just over a year ago Kroger announced a delivery service in select markets on top of third-party delivery in place. The direct-to-consumer, Kroger Ship, charges $4.99 for orders under $35. Orders above that price-point are free.
What Amazon's move means
In announcing the Fresh delivery charge strategy, Amazon calls grocery delivery one of its "fastest growing businesses." It's also in the midst of expanding its Amazon Go cashierless grocery stores, which number 20 at this point, as well as developing a new chain of traditional food stores, as the Wall Street Journal reported last March.
But expanding delivery is just one part of Amazon's strategy, as it clearly indicated in announcing the move last week. Speed, or as Amazon puts it, "ultrafast" delivery is what it's providing to its Prime members.
"Prime members love the convenience of free grocery delivery on Amazon, which is why we've made Amazon Fresh a free benefit of Prime, saving customers $14.99 per month," said Stephenie Landry, vice president of grocery delivery, in the blog announcement. "Grocery delivery is one of the fastest-growing businesses at Amazon, and we think this will be one of the most-loved Prime benefits.
"Fast and free grocery delivery with Amazon Fresh and Whole Foods Market accomplishes both those needs… We have also improved delivery speed with one and two-hour options in most Amazon Fresh cities, and we'll continue expanding ultrafast speeds to all cities where the service is available."
The strategy, according to Paul Milner, marketing director at Displaydata, is not only a big step for Amazon, but makes Amazon a major contender in the grocery space.
"Grocery is undoubtedly trending toward digital, but the store is still essential and Amazon knows it," Milner told Retail Customer Experience in an email.
"While traditional grocers don't have the foundation of e-commerce data that Amazon does, it does have one thing: experience. This expertise in the space will give grocers an advantage over an Amazon grocery store … but the experience must be enhanced with investments in technology."
Amazon is also raising what are already increasing consumer expectations about the grocery store and delivery service, Milner said.
"As such, it's essential for grocers to take a leap and invest in digital-enhanced stores that offer convenient, engaging and consistent omnichannel experiences," he said.
Symphony Retail AI's Patty McDonald, global solution marketing director, said that while the Fresh delivery strategy will open the door for new customers, Amazon has to ensure it has the technology and tools to deliver on its ultrafast free delivery declaration.
"Amazon must ensure it has the ability to manage demand forecasting around their fresh items. Without the proper technology, flaws in forecasts and issues with delivery can lead to out-of-stocks and products that are nearing their expiration by the time they make it to a customer," she told Retail Customer Experience.
To deliver on the delivery promise, Amazon will need to understand consumer demand and external factors, such as weather, in order to optimize their demand forecasting and replenishment, she said.
The same will be true for grocers battling with Amazon, McDonald added. To succeed retailers, including Amazon, will need to gain efficiency in basic technologies, such as AI, to ensure they know where inventory is in the supply chain, regardless of the channel.
"Competitors will need to step up their delivery game even if they don't offer free shipping. Traditional grocery retailers should play to their strengths to incentivize shoppers to use their services, whether that's through localized assortment, fresh items, delivery speeds or in-store experiences to entice their customers," she said.
About Judy Mottl
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